Smart Buying, Government Sales Give Chipco A Boost

Babaee began as a consultant setting up Novell and Microsoft systems for local small businesses in 1990, but in 1993, he was hired to build 500 units for ticketing workstations for a local Columbia, S.C., airline. In order to meet the demand for the systems and provide the technical support they would require, he opened Chipco Computer Distributors in 1994.

Chipco reported that it built 24,400 systems last year, up about 85 percent from 2005, making it the third-fastest-growing White-Hot Performer among the CRN Leading System Builders. Chipco's product mix was typical of the Leading Builders as a whole: About two-thirds of its units were desktops and workstations, while notebooks accounted for a small but growing percentage. The fastest-growing category was servers.

One secret to Chipco's growth, according to Babaee, the company's president, has been its ability to keep costs down by diversifying the vendors it works with. "I believe the main thing for our growth is the wide selection of vendors and overseas connections that we have to bring in quality products with a great cost savings to pass on to our customers," he said. "Since early 2000, we really made a good connection with our Chinese partners. We bring in a container of products on a monthly basis. Another thing is being able to diversify our organization."

Babaee also said Chipco has been moving into new markets, particularly government and education. He said resellers and consultants accounted for 60 percent of Chipco's business last year and the other 40 percent included the federal and state government and school districts. Chipco now has a GSA contract with the federal government and works with several school districts.

"We discovered in early 2000 that we were missing a lot of opportunity in state government because our resellers weren't able to compete in that market," he said. "In 2002 we were able to deliver 6,000 units to schools in Mississippi in three months. None of our resellers had the space, money or anything to do that many units in three months."

The server market has been growing fastest for Chipco as it tries to meet the needs of growing SMB customers. The company built about 3,000 servers last year, triple what it built the year before. Babaee said a lot of the small businesses that once relied on peer-to-peer networks are now moving to servers, which has been fueling the company's server business.

"Another area of growth is in data backup servers, which are boxes with a whole bunch of hard drives that will serve as a backup rather than tape. Tapes can be damaged, can be broken, but the hard drive storage with its redundancy, RAID controllers ... it's something that's really growing in the market as well," he said.

Unitrends, Columbia, S.C., a reseller that purchases custom storage servers from Chipco on a monthly basis, will continue to be a Chipco customer because of the quality of the product and competitive pricing, Operations Coordinator Latees Kendrick said.

"I definitely think they're top quality. We've only been in this relationship for a few months but their customer service and their quality is great. They're very customer-focused and they know a lot about the hardware," she said. "Their pricing is very competitive. They're always willing to price-match, and to date, we haven't had any issues. If we do have some manufacturer defects, they're always willing to take it upon themselves to handle the return."

But Chipco's location might seal the deal in its relationship with Unitrends, another example of how it has built itself up by being a resource for the local market. "They're about half a mile down the street. ... So the opportunity to work with them is great because they're a great system builder and they're right in our backyard. It's definitely convenient," Kendrick said.

For Mike Ray, vice president of the solutions group at Comdoc Integrated Solutions, Savannah, Ga., Chipco's ability to deliver support to his customers is a factor in his continued support of the company.

In addition to purchasing custom servers, workstations and laptops, Comdoc buys retail and restaurant POS systems from Chipco. "They're more than just a supplier—I use them for everything," Ray said.